43% of Wall Street specialists say prediction markets can add value, but only if liquidity improves

A flash survey released this month shows 43% of Wall Street market structure specialists say prediction markets can add value to institutional trading. The same survey also shows deep concern about trading depth and liquidity.

The work was produced by Crisil Coalition Greenwich and focuses on how these markets may fit into professional trading over the next two years.

The survey covered 53 U.S.-based specialists across the buy side, sell side, exchanges, market data, fintech, and brokerage firms. Only 2% said they had no view.

Prediction markets move from campus experiment to market infrastructure

Prediction markets began as an academic idea. In 1988, the University of Iowa launched the Iowa Electronic Markets as a teaching and research project. Participants traded contracts linked to political elections and other real events. Crisil Coalition Greenwich notes that these markets gained attention after repeatedly producing election forecasts that matched outcomes more closely than polls.

That early experiment has now turned into a live industry. Platforms like Kalshi and Polymarket drove the recent surge in interest. Their contracts cover Federal Reserve decisions, CPI data, employment reports, gas prices, GDP growth, and rare geopolitical outcomes like territorial purchases in the North Atlantic. Trading runs 24 hours a day.

Major exchanges are no longer watching from the sidelines. CME, Cboe, and Intercontinental Exchange have all moved toward this space. ICE has already invested in Polymarket. Large brokerages such as Interactive Brokers and Robinhood are also pushing access. Crisil Coalition Greenwich states that exchange groups see these contracts not just as tradeable instruments but also as potential new data products.

The logic is straightforward. These markets pool thousands of individual views into one price. Crisil Coalition Greenwich describes this as using crowd behavior to extract forward-looking signals. That logic explains why institutional adoption is increasingly framed as a matter of timing rather than credibility.

Wall Street splits on value as liquidity dominates the debate

About 43% of the survey’s respondents said they like prediction markets, and 36% took a neutral stance, allegedly mostly because they believe the market is too young to judge.

Their hesitation centers on contract depth, volume stability, and consistency across events. 19% held a negative view. They see these markets as encouraging gambling behavior and adding risk without improving decision-making.

Liquidity appeared as the most common concern throughout the study. Crisil Coalition Greenwich states that many political and economic contracts remain thinly traded. Low participation leads to wide spreads and weak price discovery. The report also notes that liquidity growth is circular. Volume attracts volume, but early stages are difficult.

Despite liquidity concerns, nearly three-quarters of respondents expect prediction markets to introduce new ways to speculate on financial events within 12 months. Crisil Coalition Greenwich reports that professionals see direct exposure to political and economic outcomes as a potential alternative to indirect positioning through rates or equity indices.

The survey shows 60% expect these markets to become a new source of market data for speculative trading. 43% see value as alternative data for hedging strategies. 36% expect new hedging approaches that move away from traditional derivatives.

Only 15% of respondents expect little or no impact on institutional trading in the near term.

Looking out two years, views on data value remain cautious but constructive. 56% believe data from prediction markets will be somewhat valuable as a supplement to existing feeds. 17% consider the data very valuable and capable of delivering insights that are difficult to source elsewhere.

Meanwhile, 19% believe prediction market’s overall data will stay niche, 4% see no value at all, and another 4% had no opinion.

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